2024 (10) TMI 1056 - AT - Central Excise

Valuation of Barges - CENVAT Credit - violation of Rule 3 of Cenvat Credit Rules 2004 in the month of 2012 on the ground that input and input service were received in the factory before the manufacture and obtaining registration. Whether the valuation of barges manufactured by the appellant is correct on the basis of value declared in the insurance policy or the value adopted by the appellant in terms of Rule 8 on the basis of costing method based on their ledger and books of account? - HELD THAT - The appellant have valued the barges manufactured by them as per Rule 8 of Central Excise Valuation Rules, 2000 for the reason that barges were not sold but used captively by the appellant for providing output service. In this fact, the valuation has to be done correctly under Rule 8 on Central Excise Valuation Rules, 2000. The revenue sought to value the goods on the basis of value declared in insurance policy. We find that there is no provision for taking the value shown in the insurance policy particularly in the fact of the present case as submitted by the appellant the value shown in the insurance policy has so many addition such as Ship stores and other addition in the barge post manufacturing of the barges therefore the value shown in the insurance policy does not represent the correct value of the barges. As regard the appellant s computation of the value we find that there is a Chartered Accountant Certificate which is based on the ledger and books of account of the appellant where from the total cost of manufacture has been arrived at. There are nothing wrong in the method of valuation by the appellant particularly for the reason that the department has no basis to challenge such valuation and no evidence to contradict the value arrived by the appellant therefore we are of the view that the appellant have correctly arrived at the value of barges. Therefore the differential excise duty on the dispute of valuation will not be sustainable. Whether the availment of Cenvat credit on the input and input service used in the three barges manufactured by the appellant prior to manufacture of such barges and before obtaining the Central Excise registration is correct or otherwise? - HELD THAT - There is no dispute that all the input and input service were used in the manufacture of barges therefore even though the same was received before manufacture and even before obtaining the Central Excise registration but so long the input and input service are attributed to the manufacture of barges Cenvat credit cannot be denied. Even the transition provision provided under Cenvat credit rules permits for such credit, accordingly we do not find any reason for denying the Cenvat Credit. Hence the appellant are legally entitled for the Cenvat credit and the duty payment made out of such Cenvat credit is correct and legal. There are no doubt that the valuation of barges manufactured by the appellant in terms of rule 8 of Central Excise Valuation Rules, 2000 is correct and legal. The department's attempts to apply the value declared in insurance policies are absolutely illegal and incorrect. Hence, the differential duty demand does not sustain. As discussed above the appellant have rightly availed the Cenvat credit in respect of input and input service used in the manufactured of said barges. Therefore the demand on both the counts that is on valuation as well as Cenvat credit is not sustainable. We find that the appellant have made out a very strong case on limitation also as the appellant have clearly declared about their availment of Cenvat credit as well as the valuation method to the department vide letter dated 16.05.2012 whereas the show cause notice for the period 01.03.2011 to 26.04.2012 were issued on 01.11.2016 and 28.06.2017. Both show cause notices are not sustainable on the ground of limitation also therefore the demand is not sustainable on merit as well as on limitation - the impugned orders set aside - appeal allowed.

Summary

Issues: Valuation of Barges & Availment of Cenvat Credit

Valuation of Barges:
The appellant, engaged in manufacturing barges, faced a dispute regarding the correct valuation of the barges. The appellant valued the barges based on Rule 8 of the Central Excise Valuation Rules, 2000, considering the cost of manufacture plus a 10% notional profit. The revenue department, however, attempted to value the goods using the amount declared in the insurance policy. The Tribunal found that the insurance value did not accurately reflect the true value of the barges, as it included additional items like ship stores post-manufacturing. The appellant's valuation method, supported by a Chartered Accountant Certificate based on ledger and books of account, was deemed appropriate and accurate. The Tribunal concluded that the differential excise duty demand based on the disputed valuation was not sustainable.

Availment of Cenvat Credit:
The second issue revolved around the availment of Cenvat credit on input and input services used in manufacturing the barges before obtaining Central Excise registration. The appellant contended that the credit was rightfully claimed as all inputs and services were utilized in the manufacturing process. The Tribunal agreed, stating that as long as the inputs were linked to the production of the barges, the Cenvat credit could not be denied. The Tribunal highlighted that the transitional provisions under the Cenvat Credit Rules allowed for such credit. Consequently, the Tribunal held that the appellant was legally entitled to the Cenvat credit, and the duty payment made using this credit was valid and lawful.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals with consequential relief. The Tribunal found that the valuation of the barges as per Rule 8 of the Central Excise Valuation Rules, 2000 was correct and lawful, dismissing the revenue department's attempt to use the insurance value for valuation. Additionally, the Tribunal upheld the appellant's right to avail Cenvat credit for inputs and services used in manufacturing the barges, rejecting the revenue department's denial of such credit. The Tribunal also noted that the show cause notices issued were not sustainable on grounds of both merit and limitation.